Satoshi Nakamoto, the legendary creator of the Bitcoin network, would be “rolling over in his grave” right now, according to one expert who described how intensely cryptocurrency analysts are monitoring the Federal Open Market Committee.
The FOMC, which consists of 12 members, has been holding a policy meeting that began yesterday, and it is scheduled to announce the outcome of this event later this afternoon.
Cryptocurrency, which was largely championed by libertarians and technologists in the beginning, has clearly gone mainstream.
“The fact that crypto analysts would be watching what the de facto US central bank (the Fed’s FOMC) does, which they feel will have a direct impact on BTC prices, is both wonderful and apocalyptic: wonderful because it shows how BTC (and, to a lesser degree, crypto) has been accepted as an asset class by the fiat world, and apocalyptic because such a correlation flies directly in the face of the libertarian and crypto-maximalist origins of BTC,” said Tim Enneking, managing director of Digital Capital Management.
Growing Institutional Involvement
Enneking made this statement shortly after the U.S. Securities and Exchange Commission approved applications for several exchange-traded funds (ETF) that track spot bitcoin prices, a development that many market observers have been awaiting for years.
Tyler and Cameron Winklevoss, two prominent entrepreneurs in the space who co-founded Gemini, submitted the first application for a spot bitcoin ETF back in 2013.
While the SEC’s recent decision to “green light” the existence of such funds certainly made headlines, it is only part of a broader trend where financial institutions have become increasingly involved in the industry.
Joshua de Vos, Research Lead at CCData, commented on this situation, stating that “The digital asset sector is currently marked by a period of growing institutionalisation.”
“Notably, there has been a significant absorption of GBTC (Grayscale Bitcoin Trust) inventory, a key development, considering that bankrupt entities such as Celsius and FTX were among the holders of GBTC,” he noted. “These holders were previously locked in prior to the trust’s (GBTC) recent conversion into an ETF.”
“In light of the recently approved spot Bitcoin ETFs, institutional Bitcoin products experienced a notable 224% increase in average daily volumes, surging to $2.19bn as of 26th January, underscoring the institutional attention Bitcoin products have generated since launch,” said de Vos, citing information provided by CCData.
FOMC Meeting Outcome
Several analysts offered their two cents on the impact that this month’s policy meeting will likely have on so-called risk assets, a broad category that includes cryptocurrencies, stocks, commodities and real estate.
“In the immediate case, dovish FOMC language (since it’s a foregone conclusion that rates will remain unchanged) will benefit all risk-on asset classes, including BTC and crypto,” said Enneking.
“However, because BTC’s own narrative (ETF approval, halving, four-year cycle, level-2 applications, etc.) is so tremendously bullish regardless of what the FOMC does, I don’t see it’s accompanying language as having a major – and certainly not long-term – impact on BTC prices,” he added, citing numerous headwinds.
Sam Callahan, Lead Analyst at bitcoin financial services firm Swan Bitcoin, also commented on the implications of the aforementioned central bank meeting.
“If the Fed signals during this FOMC meeting a shift towards a less restrictive monetary policy, such as cutting interest rates or slowing the pace of its balance sheet reduction, it will likely serve as a tailwind for Bitcoin’s price,” he predicted.
“Historically, Bitcoin performs well during periods of more accommodative monetary policy,” noted Callahan.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and SOL.
